Risk-Based Approach in AML/CTF

𝐖𝐞 𝐡𝐚𝐯𝐞 𝐜𝐫𝐞𝐚𝐭𝐞𝐝 𝐚 𝐟𝐫𝐞𝐞 𝐠𝐮𝐢𝐝𝐞 𝐟𝐨𝐫 𝐟𝐢𝐧𝐚𝐧𝐜𝐢𝐚𝐥 𝐢𝐧𝐬𝐭𝐢𝐭𝐮𝐭𝐢𝐨𝐧𝐬. 𝐈𝐟 𝐢𝐧𝐭𝐞𝐫𝐞𝐬𝐭𝐞𝐝, 𝐫𝐞𝐚𝐜𝐡 𝐨𝐮𝐭 𝐭𝐨 𝐫𝐞𝐜𝐞𝐢𝐯𝐞 𝐟𝐫𝐞𝐞 𝐚𝐜𝐜𝐞𝐬𝐬. 
 

𝐇𝐞𝐫𝐞 𝐚𝐫𝐞 𝐬𝐨𝐦𝐞 𝐡𝐢𝐠𝐡𝐥𝐢𝐠𝐡𝐭𝐬:

𝟏. 𝐃𝐲𝐧𝐚𝐦𝐢𝐜 𝐑𝐢𝐬𝐤 𝐀𝐬𝐬𝐞𝐬𝐬𝐦𝐞𝐧𝐭:  Institutions must regularly conduct business-wide and individual customer risk assessments, focusing on financial crime and other compliance risks, whilst dynamically adjusting to emerging threats.

𝟐. 𝐓𝐚𝐢𝐥𝐨𝐫𝐞𝐝 𝐂𝐨𝐧𝐭𝐫𝐨𝐥𝐬: AML/CTF policies and procedures should be proportionate to size, complexity, and risk profile of the organisation, tailoring effective controls to mitigate identified risks.

𝟑. 𝐊𝐞𝐲 𝐑𝐢𝐬𝐤 𝐅𝐚𝐜𝐭𝐨𝐫𝐬: Risk assessment must account for customer risk (e.g. high-risk profiles), geographical risk (e.g. high-risk jurisdictions), product/service risks (e.g. virtual currencies), and delivery channel risks (e.g. non-face-to-face interactions).

𝟒. 𝐒𝐨𝐮𝐫𝐜𝐞𝐬 𝐟𝐨𝐫 𝐑𝐢𝐬𝐤 𝐈𝐝𝐞𝐧𝐭𝐢𝐟𝐢𝐜𝐚𝐭𝐢𝐨𝐧: Use credible sources such as EU’s, national, and FATF’s risk assessments, relevant Financial Crime guidelines, and applicable industry reports to inform risk assessments and decisions. Data-driven and dynamic internal risk identification and monitoring is crucial. 

𝟓. 𝐎𝐧𝐠𝐨𝐢𝐧𝐠 𝐌𝐨𝐧𝐢𝐭𝐨𝐫𝐢𝐧𝐠 𝐚𝐧𝐝 𝐃𝐮𝐞 𝐃𝐢𝐥𝐢𝐠𝐞𝐧𝐜𝐞: Institutions must continuously screen, monitor, and assess customer relationships, apply Enhanced Due Diligence for high-risk cases and Simplified Due Diligence for low-risk profiles.

𝟔. 𝐑𝐢𝐬𝐤 𝐀𝐩𝐩𝐞𝐭𝐢𝐭𝐞 𝐚𝐧𝐝 𝐂𝐨𝐦𝐩𝐥𝐢𝐚𝐧𝐜𝐞 𝐂𝐮𝐥𝐭𝐮𝐫𝐞: Establish a clear Risk Appetite Statement (RAS) which is endorsed by senior management and ensure a compliance-focused organisational culture, with regular updates and control testing.

TIME 2 COMPLY is a consulting firm helping financial institutions manage their financial crime risks and staying compliant. We have a successful track record implementing and improving SIRA and Financial Crime Risk Assessments. We can help you create a data-driven and proactive process to refocus your efforts on the actual risks. 

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